Move Slow With Fuel Cell Makers or Risk Shock

NEW YORK (TheStreet) -- Fuel cell makers are the lighting up the party. Some have room to grow, but if investors get too excited and chase at these levels they may find more disappointment than profit.

It's easy to get carried away by emotion while watching a stock you wanted to buy continue to make new highs almost every hour for a week straight. It's a trap to fall for the "woulda shoulda coulda" game of thinking about how much money you didn't make because you didn't buy right away.

On Friday, Quantum Fuel Systems Technologies (QTWW) broke above $11 for the first time since September 2011 following a favorable earnings release. That doesn't mean all investors are happy. If you look under "portfolio widowmaker" in the dictionary, there is a picture of Quantum's company logo.

As recently as 2008, shares were changing hands for over $250 a share, and over $800 in 2004. Quantum's run makes LDK Solar (LDK) appear to be a safe and stable alternative energy sleeper for your IRA. On a positive note, if you bought Quantum six months ago when it was under $2 a share you're sitting on a five-banger that has potential to continue higher.

Friday was a fantastic day in the fuel cell space, but Monday was even better for three companies. Fuelcell Energy (FCEL) reached levels not seen almost five years ago. It's been over seven years since Ballard Power Systems (BLDP) traded above $7.38, and Plug Power (PLUG), the one facilitating the renewed interest, also reached multi-year highs. Plug Power became supercharged after Wal-Mart (WMT) expanded its usage of Plug Power's fuel cells after successful testing.

Ballard Power Systems followed suit because it supplies the actual fuel cells to Plug Power. Wal-Mart was clearly positive news for Plug power and Ballard Power but Fuelcell Energy appeared to be a sympathy play. In after-hours trading, Monday, Fuelcell dispelled notions that it wasn't capable of appreciating on its own when the company's earnings release electrified shares another 10% above the already impressive close.

While not particularly impressive in isolation, the earnings numbers are pointing in the right direction. FuelCell Energy's loss narrowed from 7 cents per share in the same period last year to 6 cents per share this year. This is after the Department of Energy Advanced Manufacturing Office gave FuelCell Energy a $2.8 million continuation contract last week.

About 10% of FuelCell Energy's float is shorted based on the latest report. If we've learned anything from Tesla's (TSLA) stock, we've learned that a highly shorted stock can continue moving higher for a long time. FuelCell energy may not produce a profit, but it may produce another short seller casualty if you try to fade it too early.

Bottom line, don't chase this one and if you want to get long, wait for a pullback below $3.50. It may not retrace that far, but your risk is much lower. I always say it's better to feel bored and missing out than to watch your account shrink.

I think all four have potential to continue higher, but Wal-Mart's stamp of approval should help Plug Power and Ballard Power Systems gain momentum long after the media excitement fades. Even so, after the massive run higher the odds favor investors who sit on their hands until Plug Power becomes available for under $9.50

On Tuesday, Fuelcell will probably open for trading above $4.30, albeit it's likely to be a gap and trap (open near the highs). If you want to gain exposure, let some emotion evaporate and profit taking to bring the shares lower on a retracement. That way you can start out on the right foot and not let emotion get the best of you.

At the time of publication, Weinstein had no positions in securities mentioned.